When compliance and business development work in tandem, everyone wins.

In the early 1990s, management thought leader Peter Drucker shared a stage with then CEO of Ford Motor Company, Red Poling. Poling gave an impassioned talk about Ford’s new approach to quality through lean production, Deming-style statistical quality control and achieving a level of product quality as good as Toyota’s. Following the Second World War, Japanese manufacturers, and Toyota in particular, focused on developing reliable, high quality, reasonably priced products, while American producers focused on vehicle style and comfort while overlooking quality as a differentiator. By the 1980’s, Toyota became a market disruptor in the U.S., aggressively taking share from domestic American rivals by offering better quality, lower-priced cars.

After making many references to his goal of building cars that were as good quality as Toyota, Drucker interrupted the CEO, and in his deep Austrian voice said “Mr. Poling, the premise of your focus appears to me to be wrong. It seems to me you are forgetting that you are CEO of THE Ford Motor Company – the company Toyota and most other automobile manufactures in the world have tried to emulate for much of this century. Why would you now want to emulate what Toyota has done in following your company? Isn’t the question you should be asking – what do automobile buyers want and how do we provide it?”

For a moment, this CEO of a Fortune 25 company was speechless. He processed Drucker’s question, prepared to respond, then paused again. Finally, he said “Professor Drucker, we honestly haven’t thought about it like that. I will go back to my team and pose that question to see where it leads us”.

The moral of this story is that when an industry is experiencing what participants perceive to be asymmetrical disruptions – new competitors, alternative models, divergent paradigms – there is a tendency to study the disruptors and ask “how can we be more like them?”. To borrow from Drucker’s line of inquiry, the real questions are – what do our customers want, are their needs something we can effectively address and how do our competencies as a company lend themselves to solving recognized and unrecognized needs?

Asymmetrical disruption is prevalent in the current state of the financial services industry. Fintechs dominate headlines by deploying new ways of addressing old problems like opening accounts, making payments and modeling investment portfolios. Bank CEOs pulled into the wake-turbulence of these disruptors make statements like “we are really a technology company” or “we’re becoming more agile in our development process”. Nice concepts, yet the genesis is how can we be more like the disruptors, not what do our customers want and how can we deliver it. In other words, they’re putting the proverbial cart before the horse.

Here are lessons we can draw into the financial services sector from the Red Poling story:

  • Start with your customer – Gather candid input to deeply understand what customers expect today, what they anticipate they’ll need tomorrow, the value they place on what they want (aka: their willingness to pay for it) and why they’d leave you. Do not rationalize what you hear. Look for recognized needs as well as those that may not yet be recognized. Use these learnings to create a picture of the future state experience your bank will deliver. This picture can then be distilled into a roadmap to create your future state customer experience.
  • Know what it takes to earn and re-earn your relevance – With clarity about customer expectations, take a fresh view of your business. Imagine you are on the outside looking in at the needs to be addressed (much the way fintechs look at financial services today). If you were completely unattached to legacy approaches to serving your customers’ needs, how would you navigate the business? How would you deliver what your customers need in the way they expect to experience it? This exercise can be a challenge due to the tendency to limit creativity by saying “that idea won’t work because of _________”. Don’t prematurely box your firm into a paradigm that a disruptor will bulldoze. Call in professional help to work through ideation with your team if you need. Remember – relevance is experienced in the moment; you can build goodwill with customers, employees and other stakeholders, but its shelf life is fairly short, and must continually be re-earned through understanding and addressing needs.
  • Self-Assess – Evaluate what you expect to deliver for customers or apply to internal processes with technology before engaging a fintech partner or embarking upon an in-house development effort. The fact is many banks believe technology will solve a problem that, in reality, needs to be addressed before introducing new technology into the equation. Outside financial services, throngs of companies have invested in enterprise resource planning systems to create operational efficiencies, only to learn they still have legacy inefficiencies after implementation.
  • Understand your firm’s competencies – You have competitive advantages. Identify them, articulate them and use them as the foundation to build before looking to new tech solutions to enhance your customer experience. From the place of competencies, you will garner the most from deploying new tools to better serve customers.
  • Own Change Leadership – Leadership is defining a vision and engaging people to deliver it. A clear vision of your bank’s future state must include how and where you deploy new tech and tools; the corollary is, absent a clear vision, tech deployments become fragmented and fail to meet expectations. With a clear picture of where your bank is going in the evolution of who you serve and how you deliver to customers, you are positioned to driving organization engagement; without broad engagement in creating your bank’s future state, change efforts are doomed.

Al Zipf is a legend of the pre-digital banking era and considered the father of electronic banking – the precursor to fintech. In the early 1950s, Mr. Zipf developed the first large-scale, general purpose bank computing system at Bank of America. After that, he led a team that developed magnetic ink character recognition to encode and read data from checks. He earned several patents in the areas of banking technology, including a first generation fax machine and the predecessor to the ATM.

What’s most intriguing about Mr. Zipf is that he was described first and foremost as a business person. He surfaced business problems he could address with technology. Zipf’s approach was to understand recognized and unrecognized needs, what the bank could do in house and through third parties to address those needs, then deliver the goods. The key to Zipf’s success came from starting with understanding the business and its’ customers, then learning how to use technology to deliver.

Let’s not get zapped into asking the wrong questions to frame the future of our business. Many fintechs start with the tech – the how to connect a customer with an experience. As bankers, we have a competitive advantage of starting with the fin – financial service relationships with customers we already serve. This is not to say the threat of fintech disruptors doesn’t exist; it does. But we can’t lose our focus on what banks already have to build upon. It is imperative to know what new and long-standing competitors are doing, learn and grow from their discoveries, and ask ourselves “what are they seeing that we don’t see when it comes to serving customers”. But that is only part of the equation. Fin first, then tech.

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